USD/CAD clings to modest recovery gains, comfortably above 1.3500 mark

• USD/CAD staged a goodish bounce from weekly lows and defended the 1.3500 mark.
• The risk-off mood benefitted the safe-haven USD and remained supportive of the uptick.
• Sliding oil prices undermined the loonie and provided an additional boost to the pair.

The USD/CAD pair refreshed daily tops, around the 1.3545 region during the early North American session, albeit quickly retreated few pips thereafter.

A combination of supporting factors assisted the pair to defend the key 1.3500 psychological mark and stage a goodish intraday bounce from weekly lows. The prevalent risk-off mood drove some heaven flows towards the US dollar, which, in turn, prompted some short-covering move around the USD/CAD pair.

On the other hand, a modest pullback in crude oil prices – down over 1% for the day – undermined the commodity-linked currency – the loonie. This, in turn, provided an additional boost and helped to the USD/CAD pair to recover a part of the previous day's sharp intraday slide of over 100 pips.

Meanwhile, the global flight to safety was reinforced by a weaker tone surrounding the US Treasury bond yields, which kept a lid on any strong gains for the USD. Bulls even seemed rather unimpressed by Thursday's mostly upbeat US macro data – monthly Retail Sales and Philly Fed Manufacturing Index.

Looking at the technical picture, the USD/CAD pair remains well within a broader picture held since the beginning of July. This makes it prudent to wait for some strong follow-through buying before confirming a near-term breakout and positioning for the next leg of a directional move.

Technical levels to watch